February 2018 Quick Links

Introduction: Sarah Rapson, Director of Authorisations

Consulting on our Approaches to Authorisation and Competition

Every day people across the UK rely on a range of financial services, from basic bank accounts to car loans, mortgages, pensions and complex investment products.

They need to have confidence in these services and the firms that provide them. They expect the market to be fair, open and competitive. They have high expectations of those who regulate these firms.

Authorisation is the gateway to the market. Firms wishing to provide regulated financial services and products must have our authorisation. Individuals holding important functions in those firms must be approved by us.

Through authorisation and supervision we ensure that they meet minimum standards and continue to meet them for as long as they are authorised.

Regulation can hinder market entry. It can be complex and hard for firms to understand. It has not always kept up with market innovation, with some firms operating business models the rules did not foresee. Regulatory uncertainty or complexity in the authorisations process can deter firms from entering the market. These challenges can pose an even greater barrier for firms that are new to the market, innovative or both.

In Approach to Authorisation we explain: the purpose of, and our approach to, authorisation; the public value it delivers and changes we are making to improve our approach.

We describe how we use authorisations as a regulatory tool, primarily to prevent harm. We do this by ensuring that regulated firms and individuals meet common sets of minimum standards; to improve conduct standards and culture in firms and to promote competition and innovation.

We want your views on the contents of the papers and your responses to four consultation questions.

Hot topics

FCA/Practitioner panel survey

Most of the firms regulated by the FCA are classified as smaller firms, whether by market capitalisation, funds under management, size of balance sheet or number of employees. Many of these firms will now have received an invitation to take part in the joint FCA and Practitioner Panel survey which we featured in last month’s Regulation Roundup.

The FCA Smaller Business Practitioner Panel (SBPP) provides input into the survey and uses its findings to help with its work. One of the issues the SBPP has raised is that smaller firms in particular may have little resource available for activities which are not compulsory, such as responding to complex consultations. This can result in the voice of smaller firms being lost.

The survey is an opportunity for smaller firms to speak directly to the FCA and share their views and concerns. We’ve streamlined this year’s survey to make it easier for you to complete – if you are one of the firms randomly selected to take part, it should only take around twenty minutes of your time.

The fair treatment of existing interest-only mortgage customers

We published the findings from our thematic review on ‘the fair treatment of existing interest-only mortgage customers’. The review covered 10 lenders representing approximately 60% of the UK interest-only residential mortgage market. It follows on from the publication of Guidance in 2013 on ‘Dealing fairly with interest-only mortgage customers who risk being unable to repay their loan’.

The review assesses the steps lenders have taken since our published guidance and examines how customers who engage with their lender are being treated. We commissioned some consumer research to understand why large numbers of customers are not engaging with their lender.

We found that lenders are actively trying to communicate with their customers to understand repayment strategies and to provide appropriate and affordable solutions where needed. However, most of their interest-only strategies are based on writing to customers at specific times before maturity. Where lenders had segmented customers and adopted contact strategies tailored to the different customer types identified, they were able to increase contact with customers who are considered higher risk.

We are encouraged to see that lenders have taken positive steps to engage with and help their interest-only borrowers. However, as volumes of maturities start to increase towards 2028/29, it is important that lenders take time to review and enhance their strategies.

The customer research identified a number of strategies which may help boost engagement with customers. We will continue to monitor this risk as part of our ongoing activity through regulatory data and other sources such as complaints and market intelligence.

Financial Advisers

Requirements when providing Pension transfer advice

We have recently written to all firms holding the permission to advise on pension transfers and opt-outs to remind them of our requirements when providing pension transfer advice. The full text of the letter is on our website and we recommend any advisers holding the permission who have not read the letter should do so. We also suggest any advisers considering offering such advice in the future should familiarise themselves with our requirements.

Guidance for uploading professional standards data to Gabriel

We have published guidance to help firms with the submission of their professional standards data (part of the Retail Mediation Activities Return (RMAR) section G). This is particularly helpful for firms with large numbers of advisers to report, reducing the amount of retyping required from firm records. The guidance explains how firms can use the XML extract and upload functionality in Gabriel (our online system for collecting and storing regulatory data from firms).

Mortgage Advisers and Lenders

FCA Live & Local regional programme continues

We are continuing our series of interactive Q&A roundtable discussions with FCA and industry experts. Upcoming sessions include 22 March in Glasgow with UK Finance, and 10 May in Newcastle with the Association of Mortgage Intermediaries. Both sessions will be joined by Financial Ombudsman Service and a senior FCA representative on the panel.

General Insurance Intermediaries and Insurers

PS18/1: Insurance Distribution Directive implementation

We have published our third Policy Statement setting out near-final rules for the implementation of the Insurance Distribution Directive (IDD). This Policy Statement responds to the feedback we received to CP17/33 (our third IDD CP), as well as feedback on certain matters deferred from CP17/23 (the second CP), and feedback to the IDD-related aspects of two Quarterly Consultation papers CP17/32 and CP17/39.

Life insurance & Pension Providers

PS18/1: Insurance Distribution Directive implementation

We have published our third Policy Statement setting out near-final rules for the implementation of the Insurance Distribution Directive (IDD). This Policy Statement responds to the feedback we received to CP17/33 (our third IDD CP), as well as feedback on certain matters deferred from CP17/23 (the second CP), and feedback to the IDD-related aspects of two Quarterly Consultation papers CP17/32 and CP17/39.

Wealth Managers & Private Banks

EBA recommends new prudential regime for MiFID investment firms

At the end of September 2017, the European Banking Authority (EBA) published their final report and recommendations for an appropriate prudential regime for all MiFID investment firms. This is in response to a call for advice from the Commission who will now consider the recommendations and are expected to publish a legislative proposal before the end of 2017.

Investment Managers & Stockbrokers

EBA recommends new prudential regime for MiFID investment firms

At the end of September 2017, the European Banking Authority (EBA) published their final report and recommendations for an appropriate prudential regime for all MiFID investment firms. This is in response to a call for advice from the Commission who will now consider the recommendations and are expected to publish a legislative proposal before the end of 2017.

Since 3 January 2018, emission allowance market participants (EAMPs) have been brought within the scope of the Market Abuse Regulation by MiFID II. Therefore, EAMPs are required to file the following notifications with the FCA in certain circumstances:

Significant further analysis of how consumers use overdrafts has reinforced our concerns and we remain of the view that fundamental reform of this market may be necessary to protect consumers. We also set out some specific issues of concern in other high-cost credit markets, and are committing to take forward several initiatives to encourage better use of alternatives to high-cost credit.

News and Publications

Compliance reporting to the Competition and Markets Authority (CMA)

The annual deadline for private motor insurers and intermediaries to submit Annual Compliance Reports to the CMA has now passed. However, the CMA will continue to accept late returns until 22 February.

You can now submit your return via an online form as an easier alternative to submitting by email.

A recap on why this information matters and why you are obliged to send it to the CMA can be found in the Order and the explanatory note on the CMA’s webpages.

2018/2019 fees and levies

Firms that are intending to cancel their permission and do not wish to be liable for next year’s annual fee (1 April 2018 – 31 March 2019) need to apply to cancel online, through Connect by 31 March 2018. If they do not they will be liable for the full annual fee.

Have your say: transitional consultation on SM&CR closes 21 February

We are consulting on how we propose to move dual-regulated insurers and FCA solo-regulated firms to the SM&CR. We’re also consulting on how we will extend the duty of responsibility to these firms.

These consultation papers were published in December 2017 and will close on 21 February.

Our aim is to move firms to SM&CR in a way that is simple, clear and proportionate. To do this, we’ve proposed different approaches for different types of firms.

You can read our proposals and send us your views using the links below:

OPBAS has begun its work, under regulations which came into force on 18 January 2018. OPBAS is hosted within the FCA, and has responsibility for overseeing the standards of anti-money laundering supervision by the professional body supervisors outlined in Schedule 1 to the MLRs 2017. This is part of a suite of measures by the Government as part of a wider package of reforms to strengthen the UK’s AML supervisory regime. We recently published our specialist sourcebook for professional body supervisors that sets out expectations in relation to anti-money laundering supervision.

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